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The Board of Phoenix Mills (PHNX) has approved acquisition of 32% stake
in two Chennai SPVs in a marginally value‐accretive transaction. We
maintain ‘BUY/SO’ rating on the stock.
Phoenix raises stake in Chennai SPVs
PHNX will enhance its stake in two Chennai SPVs, Classic Mall Development and Classic
Housing Projects, to 63% and 66% respectively by purchasing 32% stake in each of
them for INR 1.06 bn from Kshitij Venture Capital Fund. PHNX currently holds an
effective economic interest of 31% in Classic Mall Development [1 msf mall;
operational in Q3FY13E; Satyam (Multiplex Operator), Pantaloon & Lifestyle has
commenced fit‐out activity) and a 0.25 msf residential development in Chennai (0.25
msf launched in H1FY12; sold ~70%)] and 34% in Classic Housing Projects (executing
0.25 msf residential development in Chennai).
Acquisitions marginally NAV accretive
We have valued the combined equity in these SPVs at INR4.8bn against the implied
deal valuation of INR3.3bn, implying that the deal is marginally NAV accretive. Payment
of the acquisition will be staggered, with INR0.3bn payable within 90 days and the
balance at the end of 15 months from the date of the execution of the share purchase
agreement. Kshitij will continue to own 32% in the SPVs (entitling it to receive
dividends, if any) till Q1FY14E. PHNX will control majority stake post payment of final
tranche against minority stakes currently.
Outlook and valuations: Value accretive; maintain ‘BUY’
Post acquisition, we revise our NAV marginally upwards to INR249/share from
INR246/share to factor in the stake enhancement at a discount to fair value. Near‐term
triggers are: Shangri‐La Hotel becoming operational in H1FY13 and commencement of
the Chennai mall. We reiterate ‘BUY/SO’ rating on the stock, with target price of
INR249/share at par with FY13E NAV.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The Board of Phoenix Mills (PHNX) has approved acquisition of 32% stake
in two Chennai SPVs in a marginally value‐accretive transaction. We
maintain ‘BUY/SO’ rating on the stock.
Phoenix raises stake in Chennai SPVs
PHNX will enhance its stake in two Chennai SPVs, Classic Mall Development and Classic
Housing Projects, to 63% and 66% respectively by purchasing 32% stake in each of
them for INR 1.06 bn from Kshitij Venture Capital Fund. PHNX currently holds an
effective economic interest of 31% in Classic Mall Development [1 msf mall;
operational in Q3FY13E; Satyam (Multiplex Operator), Pantaloon & Lifestyle has
commenced fit‐out activity) and a 0.25 msf residential development in Chennai (0.25
msf launched in H1FY12; sold ~70%)] and 34% in Classic Housing Projects (executing
0.25 msf residential development in Chennai).
Acquisitions marginally NAV accretive
We have valued the combined equity in these SPVs at INR4.8bn against the implied
deal valuation of INR3.3bn, implying that the deal is marginally NAV accretive. Payment
of the acquisition will be staggered, with INR0.3bn payable within 90 days and the
balance at the end of 15 months from the date of the execution of the share purchase
agreement. Kshitij will continue to own 32% in the SPVs (entitling it to receive
dividends, if any) till Q1FY14E. PHNX will control majority stake post payment of final
tranche against minority stakes currently.
Outlook and valuations: Value accretive; maintain ‘BUY’
Post acquisition, we revise our NAV marginally upwards to INR249/share from
INR246/share to factor in the stake enhancement at a discount to fair value. Near‐term
triggers are: Shangri‐La Hotel becoming operational in H1FY13 and commencement of
the Chennai mall. We reiterate ‘BUY/SO’ rating on the stock, with target price of
INR249/share at par with FY13E NAV.
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